Iraq’s 2011 Budget

By Naseer Al-Ali/ Baghdad, Asharq Al-Awsat- At a time when nongovernmental economic establishments called for expediting approving of the next year’s (2011) budget and cutting down the operational expenditures to reach the lowest rate of deficit, Othman al-Juhayshi, member of the Iraqi parliament for the Al-Iraqiya list, said that the political blocs have agreed at the meeting held last Saturday to complete the formation of the parliamentary committees and authorize the Financial Committee to study the budget for next year to approve it within the next few weeks after the blessed Id al-Adha.

The Iraqi Finance Ministry has already announced that it worked out the budget for next year at $86.4 billion, which is more by $14 billion than the current budget.

A statement by the Economic Media Center, a copy of which was obtained by Asharq Al-Awsat, said that “at a time when the Center welcomes the convening of the Council of Representatives, the next task that it is supposed to shoulder is to expedite the formation of its committees to carry out their missions, including the Economic Committee which shoulders the responsibility of studying the general budget and working out the suggested amendments to its articles, which have become necessary to be discussed and approved to avoid the delay that is taking place in the budget of last year, in addition to making it binding for the Finance Minister to prepare a closing balance after each fiscal year to show the size of the financial transactions and the volume of the real expenditures and the mechanisms for offsetting the budget deficit, which are right mechanisms that should be followed in accurately working out the budget to estimate the deficit in a real and objective way.”

It added: While the Center urges the Council of Representatives to quickly approve the budget, it is at the same time calling for further scrutinizing the articles of the operational spending and to trying to cut down the operational expenditures in a manner that does not have an impact on the state general performance in order to reach the lowest possible budget deficit in light of the advance announcement about the possibility that the budget deficit may reach about 18 trillion dinars (more than $15 billion) this year in spite of the expectation of a rise in Iraq’s oil exports, and subsequently, a growth in the revenues from oil sales. In earlier statements, Fadil Nabi, undersecretary of the Finance Ministry, said that his country “has suggested a budget for next year by $86.4 billion.” Nabi added that “Iraq has submitted an initial draft budget for 2011 at 102 trillion dinars ($86.3 billion)” assuming that the international price of oil is $70 per barrel.

Iraq depends on its oil revenues to finance about 95 percent of its budget. Iraq, an OPEC member state, signed agreements with international oil companies that may increase its output capacity within 6-7 years to 12 million barrels a day from the current 2.5 million barrels a day, which would make it a competitor of Saudi Arabia, the largest crude producer in the world. According to the assurances of the Finance Ministry’s undersecretary “the budget is currently at the Council of Ministers and will be sent to the parliament after the formation of its committees.”

For his part, Dr Othman al-Juhayshi, the deputy for the Al-Iraqiya list, told Asharq Al-Awsat that “the budget of next year should have been approved one month before now, but the delay in the parliamentary sessions and the crisis of forming the government prevented this. As all know, approving the budget requires enough study by the Financial Committee to amend, add, and delete [whatever is necessary] and then it should be subjected for the first and second readings at the Council of Representatives before a vote takes place on it. These articles certainly require time, and this is what the new parliament does not have.”

He disclosed that “all the [political] blocs have agreed at the last session on the need for expediting the formation of the committees after Id al-Adha, and to send a message from the Council of Representatives to the government to ask it to submit the budget to the parliament to approve it. Hence, the budget is one of our priorities at present in light of its importance and to prevent obstructing the government’s work in all that is related to the citizens, pointing out that delaying approving the budget of 2011 has taken place due to the problems between the blocs because the elections were about to be held. The government became a care taker government, and the delay has negatively affected all state institutions, and we do not want to repeat this again.” The parliament last January approved the 2010 budget at $72.4 with a deficit by $19.6 assuming that the oil price is $62.50 per barrel.

For his part Mazhar Muhammad Saleh, expert of the Iraqi Central Bank, said in a statement to Asharq Al-Awsat that “the issue of estimating Iraq’s budget for next year is a very complicated issue and depends on several scenarios, including the daily anticipations, such as the rates at the financial markets and the oil markets, and the international expectations for the next stage was between $80-85 per barrel within the framework of OPEC market. In Iraq, the price is lower by $7 than the expectations for the international market.”

He said that “Iraq’s budget mainly depends on oil sales, which means that it has one source, and last year it was expected to sell 2.15 million barrel a day, and the current output is still low and below 2 million barrel for several reasons that deal with exports, transportation lines, and others.”

On the anticipated figures in the budget of next year, Salih said: “There are two articles in the budget, which are the operational and investment allocations, and hence, we should think of how much can we reduce the first and increase the second for the purposes of development and investments in particular. We have expected a growth rate by 9.4 percent, which is an ambitious rate that is close to that of China.”

The current government is facing a wave of criticism because it has not submitted its closing accounts of the government budgets since 2005 and until now, and there are demands to refer the issue to the monitoring and judicial quarters because these accounts should have been discussed and approved by the parliament. The Electricity Ministry demanded allocating a sum of 7 trillion and 806 billion dinars ($6.7 billion) from the budget of next year to cover the spending on its projects in the field of developing the electricity sector, which were approved by the government.

This was announced by Musab Siri al-Mudarris, the official spokesman for the ministry, who added that the Ministry of Planning has proposed allocating 5 trillion, 266 billion, and 650 million Iraqi dinars ($4.5 billion) as an investment budget for the Ministry of Electricity, and considered it a large budget compared with the previous years. He stressed that these funds are not enough to achieve the investment projects of the ministry, pointing out that there are funds that are due to be paid by the ministry within the framework of the projects that have implemented this year and the previous years, including 2 trillion and 925 billion dinars from the treasury; therefore, they should be returned to the state treasury next year, and the ministry is bound to pay other funds that will be due in 2011.